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Saturday, 14 April 2012

SWAZI ECONOMY SET TO HIT ROCKS

Swaziland’s economy is heading for a shipwreck of Titanic proportions after news that the International Monetary Fund (IMF) has withdrawn support for the kingdom’s financial recovery plan.

Since 2010 the IMF has been working closely with the Swazi Government supporting its ‘fiscal adjustment roadmap (FAR)’ –a plan for recovery that included getting more revenue through taxes and reducing the public sector wage bill.

The Swazi Government drew up the plan and was aided by the IMF in its implementation through a procedure known as the staff-monitored programme.

But even though the FAR was the work of the Swazi Government and was completely under its control, the government failed abysmally to implement it.

Central to the plan was to reduce the public sector wage bill – that of teachers, nurses and other civil servants – by 10 percent. This it failed to do.

The government did force through 10 percent salary reductions for politicians, but last month (March 2012) MPs voted to have their pay restored because they said it was unfair that they were the only public sector workers to have taken the cut.

This week, Joannes Mongardini,head of the IMF mission to Swaziland, confirmed that it was no longer working with Swaziland on the staff-monitored programme.

He told the Times of Swaziland, the only independent daily newspaper in the kingdom, ‘Government has yet to propose a credible reform programme that could be supported by a new IMF Staff-Monitored Programme.’

He added that the national budget announced in February 2012 included, ‘recurrent expenditures that are higher than what can sustainably be financed over the medium term’.

He said the budget did not provide sufficient resources to repay all domestic arrears.

‘Finally, the budget allocates an increasing share of resources to some sectors at the expense of education and health,’ he said.

Swaziland sought the help of the IMF because it was nearly broke and needed loans from international banks, such as the African Development Bank and World Bank, to survive. It could not get these loans until it proved its economy was in order and IMF support in the form of a ‘letter of comfort’ would enable it to do this.

Without the support Swaziland is alone. There is little hope it can secure loans from international banks and even a E2.4 billion (US$307million) loanthat had been negotiated with South Africa looks likely to be withdrawn as one of its conditions was that Swaziland provided evidence that it was tackling its economic problems.

So what happens next? Since news of the IMF withdrawal broke this week there has been no public statement from the Swazi Government. We know from the past that it has been less than honest with the Swazi people about the state of the economy, with Barnabas Dlamini, the Prime Minister, even claiming a year ago in April 2011 that it had the ‘letter of comfort’ from the IMF supporting its bid for international loans, when no such letter existed.

Finance Minister Majozi Sithole, however, told local media this week he expected to have further talks with the IMF and World Bank starting next Thursday (19 April 2012), but it is difficult to see what they have to talk about, unless the Swazi Government can demonstrate it has control of the economy – which clearly it does not.